Home prices in 70 Chinese cities fell the most in almost nine years in December, dropping 0.4% month-on-month, compared to 0.3% in November, according to data from the National Bureau of Statistics (NBS). Property remained the biggest drag on the economy in 2023, with investment and new home sales falling by 9.6% and 6%, respectively.
A month after China’s local governments unveiled their latest measures to ease home purchase restrictions and boost demand, the country’s two largest cities have seen an uptick in the number of homes sold. However, analysts said that this trend is far from sustainable, as demand is being weighed down by persistently low homebuyer confidence and expectations that home prices could drop even further. Beijing and Shanghai issued their latest round of support measures last December to shore up confidence. The measures, which included cuts to down payments and extensions of mortgage repayment deadlines, seem to have yielded solid results. Home purchase sentiment, as measured by the number of new and pre-owned homes sold, rose 3 basis points month-on-month in Beijing and 7 basis points in Shanghai, according to a January report published by China Index Academy, a real estate research firm. The transactions of new homes in Beijing jumped 38.5% year-on-year to 6,106 units in December, bringing the total volume of new homes sold across the city to 66,000 units, or 74.9 million square meters. Meanwhile, new home prices rose by 0.17% year-on-year and the prices of pre-owned homes dropped by 0.63% in the same period.
The impact of the easing measures in Shanghai has been more modest, with new home sales expanding by 2.4% year-on-year, while prices rose by 0.255. The sales of pre-owned homes grew by 9.4% year-on-year, while prices fell by 0.8%, according to the report. An increase in new home sales was driven mainly by improved supply, instead of demand, said Chen Wenjing, Director of Market Research at China Index Academy. “Overall, residents are still quite cautious about buying homes, and as the market enters its off-season in January, sentiment will fall even more,” he said. Wang Xingping, Senior Analyst at Fitch Bohua, a subsidiary of Fitch Ratings, said the growing sales figures were linked to more quality listings entering the market and selling at higher price points, and were in no way indicative of a broad-based recovery in new home prices.
“Unless there is substantial improvement in buyer confidence, we do not think the trend of price increases will continue,” she said. The pre-owned housing market is faced with even greater headwinds. “Pre-owned homes are already hard to sell,” Chen said. “This, coupled with the fact that expectations of household incomes are still shaky, and homebuyers are hesitant to increase leverage to buy homes, is putting a dent in demand.” Gary Ng, Senior Economist at French investment bank Natixis, said it takes time for policy support to translate into improved confidence, which, at the moment, is dampened by lower inflation, the South China Morning Post reports.
